Importance of setting financial goals!!

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We at Fpguru.com keep stating that first you need to set your financial goals & then only your investments can be planned. Setting a financial goal is very much like planning an itinerary for your vacation. You need to know the destination, time-span & estimated cost to reach your goals. While determining the financial-goal you should always think of what sort of financial status you would want to be at, say 30 years from now.

 


Let us understand what a financial goal is & how important it is?
A financial goal simply means those dreams or goals of your life which you would like to achieve & for the achievement of which you need money. The importance of setting a financial goal is that there are no regrets in the future of not achieving something desired due to lack of finance. The list of financial goals vary from person to person and so one needs to first prioritize their goals and the time required for them to be achieved. A financial goal can be: What sort of lifestyle do you want to be living? Do you want your house loan paid off?  What sort of college education do you want to provide to your kids?  How much do you want in retirement savings? When and where will your dream vacation be? So on and so forth.

 

Financial goals are not only about setting long term goals but also short term & intermediate term goals.

Short-Term financial goals are the ones which are to be achieved within one year. These may be buying a laptop or a good mobile phone. These are mostly achieved using the current savings or by putting money in a liquid investments depending on the goal & the estimated cost.
Intermediate-Term financial goal are termed between 1 to 5 years. These goals are not to be executed immediately but may not take too long to be achieved. For example buying or replacing a car, clearing credit card bills, setting-off a small debt, getting an education etc. Funds for these goals should be invested more in debt investments.
Long-Term goals there are goals which may require more than 5 years to be accomplished or one wants to achieve it at a later stage in their life. These goals require more money as inflation will affect it more and so it is better to start saving for it today. Long-term goals can be buying a bigger house, college education or wedding for children, having a good standard of living during retirement etc. It is very important to invest your money in good investments which give rate of returns better than the inflation rate, so that the future financial goals can be achievable when required. Thus equity is a good investment for these goals.

 

How to set your own financial goals & achieve them?

 

Identify your financial goals
It is very important to first list down your financial goals in order of priority and the time frame required to be accomplished. This will also help to understand how realistic the goals are

 

Prioritize the financial goals
Each goal should be broken down depending on the time left for it & it’s importance. For eg you may have two goals in the next year, daughter’s wedding or a dream vacation. Most probably the wedding will have more priority. This is important goals can be many but resources are limited. So higher priority goals need to be funded first.

 

Make a plan for each goal
After bifurcating the term & cost there should be a plan made to achieve each goals as and when required. This is a very important step as one has to invest properly for each goal. Here one should take advise from their financial planners and also educate themselves on proper investments.

 

Evaluate your progress
It is very crucial to keep a check on the plans made for the financial goals. Regular reviews are necessary. Re-evaluate the goals if necessary. This helps to quickly deal with any shortcomings

 

Reap what you have sown
Start fulfilling your goals when the financial target set is achieved or when its time. It is like rewarding yourself when targets are reached.

 

You may or may not be able to achieve your all financial goals due to limited resources but, if you know what you want to achieve and treat savings for financial goals as a fixed   "expense," you'll be more likely to achieve success.

 

By Namrata Shah.The writer is working with FpGuru.com as a para-planner.


Comments  

 
+1 #2 Harshraj Thar 2011-06-16 14:04
I am 23 year old....and have lot of dreams...this article made me realize the importance of making a plan to fulfill the goals and dreams...
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+3 #1 akash menta 2011-06-16 11:35
Very simple to understand the importance of a goal.
will surely practice it.
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